Broker snap: Challenges at Micro Focus offset by bid upside, says Singer

23rd Jun 2011 11:35

While Singer expects revenue in the current year for Micro Focus to be slightly lower than its expectations, the broker keeps its 'buy' rating and 415p target price (TP).Results for the year ended April 2011 came in line with the range of guidance given, Singer notes, with the legacy software specialist seeing a 6% decline in like-for-like revenues with Cobol flat and Testing down 16%."The group is clearly addressing operational issues, focusing on growth opportunities to turn around performance," said analysts Tintin Stormont and Pia Tapley.Meanwhile, the company indicated that ongoing discussions with regard to a number of potential offers continue.Revenue decline is expected in the current year and the broker anticipates numbers to come in 3% below its current forecasts, but changes to bottom line figures "will be minimal"."There is still a lot to deliver to turnaround the business operationally and put it back on a growth track. This is counterbalanced by the bid offers. We see no reason to change our 415p TP," Singer said.Peel Hunt also expects a weaker current-year performance than previously expected, and revises its numbers down by 3% on lower sales. The broker has kept its 'hold' rating "in the absence of a bid". A TP of 340p is retained.---BC